Business Directories

S Africa nuclear bid may be worth $125bn

Johannesburg, October 20, 2011

South African Energy Minister Dipuo Peters confirmed that a tender proposal for construction of 9,600 megawatts of nuclear power by 2030, currently under review by the cabinet, could be worth at least 1 trillion rand ($125.7 billion).

That value would make it the highest public tender ever issued in South Africa, raising questions about how Africa's biggest economy and state-owned utility Eskom would raise the money to pay for the nuclear plants.

"We have not as yet done the full calculation, and it is only at the time that we place the bid that we will be sure about the total cost, but it would be about that or more," Peters told Reuters Insider on Wednesday in response to questions regarding speculation about the 1 trillion rand cost.

Around 85 percent of South Africa's power is produced by coal-fired power plants, and supplies are tight as Eskom battles to meet fast-rising demand in the world's top producer of platinum and a major gold miner.

South Africa has said it will invest in nuclear power to boost electricity supplies and reduce its heavy carbon footprint. The bid process is expected to start early next year.

The country currently operates Africa's only nuclear plant.

Speaking on the sidelines of an International Energy Agency meeting in Paris, Peters said the impact of the nuclear expansion on consumers would be the key factor in the final cost decision.

South Africans homes and industries are already suffering steep power tariff increases meant to help cash-strapped Eskom pay for needed power plants. A previous tender for a new nuclear plant was scrapped in 2008 due to its financial difficulties.

"Our main worry is the tariff -- ultimately the impact of this build on the tariff to consumers and industries," Peters said.

Companies from the United States, France, Japan and South Korea have long been wooing South Africa to win the bid.

A power supply crisis in 2008 shut mines for days and cost South Africa billions of dollars in lost output. New coal-fired plants are also being built, and power tariffs are rising steeply to fund such projects, hurting consumers and squeezing the profits of power-intensive mines and other industries.

South Africa plans for nuclear and renewable power to play significant roles as it seeks to reduce its carbon footprint.Peters said a tender for the supply of 3,725 MW of renewable energy by 2016 has attracted massive interest so far.

"We've seen companies from Spain, Germany, Denmark, all over the world, including China and Russia," she said, adding that an emphasis would be placed on investors' ability to help create jobs and partner with South African companies. Developers have up to Nov. 4 to submit their renewable energy bids. - Reuters